Our exports will also be hampered because it (the costs) is getting more expensive due to the carbon tax imposed by importing countries.
The cost of mitigating the impacts of extreme weather could reach 40 percent of Indonesia’s gross domestic product (GDP) by 2050, Deputy Governor of Bank Indonesia (BI), Juda Agung, has said.
"The amount is very significant," he noted at a G20 side event entitled “Scaling up Green Finance in Indonesia,” held here on Friday
However, if various mitigation attempts are carried out in accordance with the country’s commitments under the Paris Agreement, the cost would be just 4 percent of the GDP, Agung highlighted.
Hence, it has become increasingly important to strive for economic development and environmental protection simultaneously, he added.
Economic growth is often pursued without paying attention to the environmental damages caused by economic activities, he noted.
Lower-class people usually suffer the most from environmental degradation, such as air pollution, flood, drought, and loss of access to economic resources, the deputy governor of BI said.
Furthermore, Indonesia will suffer from various economic and financial impacts if the country does not immediately implement policies that support the development of a green economy, he stressed.
For instance, Indonesia could lose export opportunities due to export limitations on commodities that do not meet the green product requirements, he pointed out.
"Our exports will also be hampered because it (the costs) is getting more expensive due to the carbon tax imposed by importing countries," he explained.
Further, low-carbon investments in Indonesia, such as the ones for the development of electric cars, could be moved by investors to other countries that have already implemented clear green industry policies.
The third possible impact would be limited access to global financing as investors favor the green financial sector more and more and prioritize investment in the sector.
Hence, BI is paying great attention to the issue since it has a large economic impact, Agung said.
"If the value of export declines, it will affect the current account. Thus, it will (also) have an impact on monetary and financial system stability," he added.
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